Health reform puts Maryland on the hook

Marc Kilmer

Tucked into the newly enacted federal health care legislation is a mandate that states expand Medicaid, which will cost Maryland hundreds of millions of dollars. But Gov. Martin O'Malley declared in a recent speech that this bill will actually save the state money. Considering that in the same speech, he also bragged about the state's health care programs — without noting their significant problems — perhaps his judgment isn't all that reliable. Just as the state's 2008 Medicaid expansion (championed by Mr. O'Malley) has been a burden on the state's budget, so too will be this health care legislation.

In hailing the passage of federal health care legislation, Governor O'Malley claimed it "will build on our progress" in Maryland. Of course, he defines "progress" in terms of legislation he has championed. Two of the initiatives he mentioned — Medicaid expansion and a health insurance partnership with small businesses — are good examples of why government should not be in the health care business.

The governor commended an expansion of the state's Medicaid program. Yes, more people are now enrolled in the state's medical care program than when Governor O'Malley entered office. That is in large part why the governor requested $6.2 billion in this year's budget for a program that cost $4.8 billion in 2007, a 29 percent increase in four years.

The Medicaid expansion specifically championed by Governor O'Malley was already exceeding cost estimates by the end of its first year. The cost for all of the state's medical care programs has been higher (usually far higher) than the amount budgeted for them in every year of Governor O'Malley's term. This runaway spending is directly contributing to the state's current budget woes.

Governor O'Malley also said the Maryland Health Insurance Partnership is a model for the nation. This partnership gives subsidies to small businesses to help their employees obtain health insurance. When it was passed, it was estimated that it would cover 15,000 "newly insured adults." The Department of Health and Mental Hygiene boasts of "over 10,000 covered." However, the number of individuals covered by the program as of December 2009, according to the Maryland Health Care Commission, is only 1,050.

Is this "progress," as Governor O'Malley claims? Probably not. But the governor is likely correct in saying that the federal health care legislation will build on these programs' results. Like the state Medicaid program, the new federal programs will cost more than anticipated. And like the state health insurance partnership, the federal programs will not cover as many people as projected or help businesses obtain more affordable health care coverage to any significant degree.

The very legislation Governor O'Malley says will save the state money actually forces Maryland to expand its Medicaid program, something the Department of Legislative Services has estimated will cost upward of $200 million over the next 10 years. Policymakers are already projecting deep deficits over the coming decade, and this new federal mandate will only worsen them.

Don't expect Governor O'Malley's new health care council to address these issues, however. In fact, don't expect too much out of that panel at all. There really is no need for a council of this sort to make recommendations. There are plenty of analysts in the governor's budget office or employed by the General Assembly who could do this.

This council is just another way to spend taxpayers' dollars and provide some press coverage for the governor in a tough election year. Unfortunately, very little of this coverage will note the dismal reality of the programs celebrated by the governor — or that the federal health care bill will make the state's budget problems worse.

Marc Kilmer is a senior fellow at the Maryland Public Policy Institute. He can be reached at mkilmer@mdpolicy.org.